China GDP 7.9% Reversing Seven Down Quarters

China GDP beat expectations overnight reporting 2012 Q4 GDP at 7.9%. The traders front-running oil, copper and commodities yesterday, that created the broad market push higher, were correct. China is very skilled at sharpening their pencils, ahem, cough, ahem, and had the data for two weeks so there was plenty of time for proper massaging.  The GDP is significant since it reverses the seven down quarters in a row. This will fuel expectations that not only is a hard landing off the table but so is a soft landing. There is no landing at all, it is all blue skies and roses every day in China, traders all over the world are sounding trumpets proclaiming nothing short of a strong robust full blown recovery in China here forward. What do you think?

2011
Q1 = 9.7%
Q2 = 9.5%
Q3 = 9.1%
Q4 = 8.9%
Average = 9.3%

2012
Q1 = 8.1%
Q2 = 7.6%
Q3 = 7.4%
Q4 = 7.9%
Average = 7.8%

The projection by China for 2012 was 7.5% as the average. 2012's average comes in at 7.75%, and, thru the power of math, rounding up can provide another handle to state that 2012 averages 7.8% overall.  This provides a beat of 0.3 percentage points and provides China leaders the opportunity to puff their chests in victory as they hand the reins over to the new leadership. The 7.8% average, however, is the weakest GDP since 1999. Once the new leadership provides a firm GDP target for 2013, simply add 0.2 or 0.3 and that will likely predict where it will be ending 2013. The question is how reflective is the GDP of the true economic conditions?

The Aussie miners jump on the news since China will need huge amounts of commodities for all this growth they continue to report. Copper is up this morning on the news and this helps create bullishness in the equity markets.  Keystone is skeptical and suspects the birds will come home to roost in 2013. The big jump in exports a couple weeks ago was due to a short term spurt in holiday needs, not for parts or components that would create a base line increase. Europe, China's number one customer, remains in recession and depression and auto sales are falling off a cliff. The U.S. growth remains flat moving forward and as the Philly Fed shows yesterday, the economy is sick under the surface. The move from a rural society to urban is occurring slower than expected in China and this domestic-led growth is supposed to be the main driver forward. The newly-constructed empty cities in China continue to accumulate dust on the window sills.  Add all this together and a continually 8% growth rate will remain highly suspect. It may simply be the result of a sharpened pencil.